Reference no: EM132536340

Variable and Absorption Costing Unit Product Costs and Income Statements

Lynch Company manufactures and sells a single product. The following costs were incurred during the company's first year of operations:

Variable costs per unit: Manufacturing:

Direct materials $6Direct labor $9

Variable manufacturing overhead $3

Variable selling and administrative $4

Fixed costs per year:

Fixed manufacturing overhead$300,000

Fixed selling and administrative$190,000

• During the year, the company produced 25,000 units and sold 20,000 units. The selling price of the company's product is $50 per unit.

Required:

Question 1. Assume that the company uses absorption costing:

a. Compute the unit product cost.

b. Prepare an income statement for the year.

Question 2. Assume that the company uses variable costing:

a. Compute the unit product cost.

b. Prepare an income statement for the year.